On-going
series: Crisis in the Caucasus - 2008
The Russian / Georgian Conflict and Its Impact on AzerbaijanWindow on Eurasia: Original
Blog Article

Kuressaare, November 20 -
The dramatic decline
in the price of oil and hence of Russia's foreign currency earnings
has contributed to that country's economic crisis, but contrary
to the expectations of many Russians, a return to a period of
higher oil prices by itself will not put the country on the path
to stable development, according to Moscow experts.

Nearly 50 percent of all Russians
tell pollsters that their country's economy is "strongly"
dependent on the price of oil, more than two-thirds think the
decline in the price of oil has had a negative impact on their
own lives and the country as a whole. And consequently, many
believe that a new rise in prices would help Russia.http://money.newsru.com/article/14nov2008/oil_poll

But Russian experts say that
even if oil were to rise to 120 US dollars a barrel, that by
itself "would not automatically bring Russia a future without
crises." And they add that if the country does not do more
than work to achieve higher prices again, it will face new and
more serious problems "three years from now." http://www.nr2.ru/moskow/207086.html

Yury Safranik, the president
of the Russian Union of Oil and Gas Producers, says that there
were two reasons for that. On the one hand, he suggested, most
of Russia's production now is based on Soviet-era investments
that no one has added much to in recent years despite the need
to replace equipment and develop new fields.

And on the other, he said, the
Russian government has made a mistake in directing all its attention
to "the salvation of the stock market," an approach
that he argues should be a "warning sign" to all "because
these fund may not reach the real sector of the economy,"
which will continue to decay.

Safranik warns that "if
a principle decision is not taken today on the financial of direct
investments in the oil and gas sector" - and he suggests
they should be trebled - then crisis phenomena will reappear
in an even sharper form" three or four years from now. That
will be true even if, as he expects, the price of oil goes to
85 dollars a barrel by the spring.

If the government changes course,
the oil and gas specialist continues, the crisis ahead will be
less severe, but if it does not, then the crisis ahead will be
"even more severe" than the one the country is living
through at present.

Safranik is obviously concerned
about saving the industry he represents, and consequently, some
may be inclined to dismiss his argument as little more than a
way to extract more government money for his sector. But many
more independent Moscow specialists are making even more dire
predictions.

One of the most thoughtful of
these is Ruslan Grinberg, director of the Institute of Economics
of the Russian Academy of Sciences. He argues that there is likely
to be an easing of the economic crisis in the near term as the
price of oil goes up to 70 to 80 US dollars a barrel but adds
that any resulting improvement will not last long unless Moscow
makes other changes.

Expanding Russian natural gas
sales - a step many have urged in recent weeks - will not help
very much either, Grinberg says. "Of course that is fine
when gas costs a lost but if oil will become less expensive,
so too with gas. [And] if the recession continues, then the demand
for resources will decline and that means the price for gas will
fall.

At present, he continues, Russia
is too dependent on the sale of gas and oil, and to get out of
that dangerous trap, he says, Moscow must work "not only
to revive the economy but to change its structure," so that
the country will be able to offer for sale a greater variety
of products and thus not be so dependent on the price of only
one or two.

The current situation, he continues,
is the result of Russian government decisions, and this "primitivization"
of the economy, which began in the 1990s, deepened still further
over the last eight years," the period during which Vladimir
Putin ran the country and claimed to have stabilized the situation
there.

"Crudely speaking,"
the Academy of Sciences economist says, what happened was the
following: first, we produced poor quality goods, then, we ceased
to produce anything at all. [And in order to reverse that,] we
have some very serious tasks ahead" if the Russian economy
and Russian society are going to avoid a disaster.